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Entering Into a Licence as a Commercial Property Tenant

With a high degree of flexibility offered, licences could be highly beneficial to start-up businesses, as it may not be possible to forecast sales volumes, activity levels and space requirements over a long term. It could also be highly advantageous if you are a small business and are looking for short-term property solutions, such as serviced offices, additional parking arrangements or setting up a temporary shop (i.e. Christmas shops). A Licence is an ideal agreement to cover this type of situation.

The advantages of a licence include:

• Licences cover a relatively short period of time – in general up to six months, whereas leases usually run for many years and can have onerous conditions.
• Most licences give both the landlord and tenant the right to terminate the agreement. A typical notice period is 28 days.
• Solicitor’s fees are considerably reduced for preparing a licence.

The main disadvantage of entering into a licence as a tenant, is that you have no right to renew the licence once it has expired. This is one of the main reasons why many landlords prefer to offer licences instead of leases, so an upturn in market rent can be reflected in the rents being charged.